Businesses Push White House For More Cuba Access

Courtesy of the Wall Street Journal, a report on how US companies are eager to recover lost ground in Cuba:

Pictured, cargo cranes at Cuba’s Mariel port.

U.S. businesses are pressing the Obama administration to offer wider access to Cuba’s markets than it has signaled, fearing they could lag behind overseas competitors as the nation takes steps toward opening up its economy.

The administration plans to provide its first set of detailed guidance in coming days, a month after President Barack Obama surprised the world by moving to renew diplomatic and economic ties after decades of sanctions.

Some American industries, including agriculture and travel, are eager to recover lost ground in Cuba and are already pressing the administration to go further than it did in December to open up trade and investment, despite determined opposition from some lawmakers.

“If we move slowly as Americans, we’re tying one hand behind our backs,” said Devry Boughner Vorwerk, vice president for corporate affairs at agribusiness giant Cargill Inc.

But some former U.S. officials and other experts are encouraging the administration to move cautiously because of Cuba’s state-run economy, dismal credit record, poor treatment of investors and the tangled web of restrictive U.S. government laws and rules, many of which require congressional action to be removed.

“It’s best to move slowly,” said John Kaulich, senior policy adviser at the U.S.-Cuba Trade and Economic Council, a nonprofit group that tracks the Cuban business environment. “Cuba is only going to permit what it believes it can control.”

Opening up Cuba too quickly to U.S. companies could lead to pitfalls similar to those encountered after the collapse of the Soviet Union, some economists say. But U.S. firms don’t want European, Asian or Latin American companies to gain an advantage if Havana is serious about shifting its economy away from the state. Commerce across the Straits of Florida also faces a determined political opposition not seen when rules were relaxed on Vietnam or other countries.

“It’s going to be a while before any U.S. businesses do any real business in Cuba,” said Sarah Stephens, executive director at the Washington-based Center for Democracy in the Americas, which backs closer ties with Havana.

In coming days, the Treasury Department and Commerce Department are expected to publish regulations that flesh out Mr. Obama’s December announcement on removing some of the decades-old embargo. The U.S. also is considering taking Cuba off its list of state sponsors of terrorism, a move that would lighten some trade restrictions.

Concrete regulations permitting certain types of businesses may galvanize some firms to enter the Cuban market, even if they’ve waited for decades and faced disappointment during temporary thaws before.

“When people say, ‘You gotta move slow,’ you have to take it with a grain of salt when it comes to Cuba,” said Bill Lane, global governmental affairs director at Caterpillar Inc., at a packed event hosted Wednesday by the Washington International Trade Association. The firm, like many others, sees entry into the Cuban market as a long-term process.

The coming rules will broaden the groups of Americans that can travel to Cuba without permission, quadruple the maximum amount of U.S. cash remittances to Cuban citizens, permit exports of some building materials, further facilitate the trade of agricultural goods and food, allow the sale of telecommunications equipment and infrastructure, and give U.S. banks the green light to approve card transactions in Cuba and set up correspondent account there, the White House said last month.

The rules also may alleviate the global burden of Cuba-related sanctions and allow U.S. firms to do business with Cuban citizens in other countries, among other issues.

Once the rules are published, many firms will seek clarification from the Obama administration on how it will interpret and enforce them in practice to assess how much leeway they’ll have for commerce with the island.

Then companies like Coca-Cola Co. KO -0.46% and American Airlines Group Inc., for instance, will be able to analyze whether it makes sense to sell soft drinks or operate scheduled flights.While some types of trade won’t automatically be allowed, firms may have better luck getting explicit permission to go to Cuba in the current environment in Washington.Others will immediately start pressing for more access to Cuba. Many business leaders and trade lawyers say Mr. Obama can do a lot more to open up trade and investment with Cuba without action from Congress, which passed the Helms-Burton Act and other legislation enshrining Cuban sanctions in law.

“Even if you still do require a license, you’re going to have more resources” in the administration, said Jake Colvin, Cuba expert at the National Foreign Trade Council, which represents businesses and opposes unilateral sanctions.

The agribusiness community last week organized the U.S. Agriculture Coalition for Cuba with two-dozen companies, part of an effort to keep U.S. market share in Cuba from slipping to Brazil and other countries. The U.S. has long allowed agricultural trade in Cuba on humanitarian grounds, but only on a “cash-in-advance” basis.

The new rules are expected to give Cuba’s state importers a “bit of flexibility” in paying for American food, shrinking their disadvantage in transportation and financing compared with shippers in other countries, said Ms. Vorwerk of Cargill, who is chairwoman of the agricultural coalition. “It will take an act of Congress for us to be able to take advantage of flexible financing,” she said.

Ms. Vorwerk says she’s optimistic Congress could act to lift Cuba restrictions as early as this year, but most experts don’t see Congress touching the issue soon.

Sen. Robert Menendez (D., N.J.) said the coming regulatory changes are “clearly intended to circumvent the intent and spirit of U.S. law and the U.S. Congress.”

“It’s a fallacy that Cuba will change just because the American president believes that if he extends his hand in peace that the Castro brothers suddenly will unclench their fists,” Mr. Menendez, the top Democrat on the Senate Foreign Relations Committee, said in the Senate on Tuesday.

Another problem: The Cuban government faces U.S.-recognized claims for seized property that is now worth $7 billion with accrued interest.

One test will be whether U.S. banks embrace card use in Cuba and establish correspondent accounts, which would facilitate direct payments without having to rely on third countries.

“If there are banks opening up correspondent accounts, that will definitely make trade easier,” said Serena Moe, a former sanctions official at the Treasury Department who is now at the law firm Wiley, Fein & Fielding.

But even a green light for the U.S. government may not be enough, since some banks have paid out billions of dollars tied to Cuba sanctions violations. The existing web of regulations is so wide that many firms will be wary of stepping up soon.

“U.S. banks don’t want to have anything to do with Cuba,” said Robert Muse, a Washington lawyer who advises companies doing business in Cuba on U.S. law.

This entry was posted on Thursday, January 15th, 2015 at 10:22 am and is filed under Cuba.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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